Reviewing BAB (BABB) and Hostess Brands (TWNK)

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BAB (OTCMKTS:BABB) and Hostess Brands (NASDAQ:TWNK) are both small-cap consumer staples companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitability, dividends, analyst recommendations, risk and valuation.

Valuation & Earnings

This table compares BAB and Hostess Brands’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
BAB $2.22 million 2.24 $450,000.00 N/A N/A
Hostess Brands $776.19 million 1.88 $223.89 million $0.63 17.79

Hostess Brands has higher revenue and earnings than BAB.

Dividends

BAB pays an annual dividend of $0.04 per share and has a dividend yield of 5.8%. Hostess Brands does not pay a dividend.

Profitability

This table compares BAB and Hostess Brands’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BAB 26.90% 20.21% 15.18%
Hostess Brands 27.74% 3.78% 1.91%

Institutional & Insider Ownership

85.4% of Hostess Brands shares are owned by institutional investors. 34.1% of BAB shares are owned by insiders. Comparatively, 24.6% of Hostess Brands shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk and Volatility

BAB has a beta of -0.12, meaning that its share price is 112% less volatile than the S&P 500. Comparatively, Hostess Brands has a beta of 0.28, meaning that its share price is 72% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and target prices for BAB and Hostess Brands, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BAB 0 0 0 0 N/A
Hostess Brands 0 6 3 0 2.33

Hostess Brands has a consensus price target of $14.88, indicating a potential upside of 32.69%. Given Hostess Brands’ higher possible upside, analysts clearly believe Hostess Brands is more favorable than BAB.

Summary

Hostess Brands beats BAB on 8 of the 13 factors compared between the two stocks.

BAB Company Profile

BAB, Inc. franchises and licenses bagel and muffin retail units under the BAB, MFM, and SD trade names in the United States. Its BAB franchised brand consists of units operating as Big Apple Bagels featuring daily baked bagels, flavored cream cheeses, premium coffee, gourmet bagel sandwiches, and other related products. The company's MFM brand consists of units operating as My Favorite Muffin featuring various freshly baked muffins, coffee, and related products; and units operating as My Favorite Muffin and Bagel Cafe featuring freshly baked muffins, coffee, and related products, as well as various specialty bagel sandwiches and related products. Its SD brand includes SweetDuet Frozen Yogurt and Gourmet Muffins brand that offers frozen yogurt and gourmet muffins. As of November 30, 2017, the company had 82 franchise units and 3 licensed units in operation in 23 states and the United Arab Emirates. It is also involved in the sale of bagels, muffins, and coffee through nontraditional channels of distribution, including under licensing agreements. BAB, Inc. was incorporated in 2000 and is based in Deerfield, Illinois.

Hostess Brands Company Profile

Hostess Brands, Inc., a packaged food company, develops, manufactures, markets, sells, and distributes fresh sweet baked goods in the United States. It primarily offer coffee cakes, cinnamon rolls, honey buns, brownies, bread and buns, jumbo muffins, and eclairs under the Twinkies, CupCakes, Ding Dongs, Zingers, HoHos, Donettes, Dolly Madison, and Superior on Main brands. The company was formerly known as Gores Holdings, Inc. and changed its name to Hostess Brands, Inc. in November 2016. Hostess Brands, Inc. was founded in 1919 and is headquartered in Kansas City, Missouri.

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